Report of the Board of Directors

CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT

2013 marked ten years since the publication of the first Corporate Social Responsibility (CSR) and Sustainable Development Report for all Titan Group activities, in accordance with international standards and best practices. During the past decade, special emphasis was placed on the comprehension of corporate values, principles and standards that promote transparency and enhance not only efforts for continuous self-improvement, but also partnerships with stakeholders on initiatives and actions that create value.

The reduction in the number of accidents of the direct and indirect staff in 2013 contributed to a further decline in the accident rate and to the overall improvement of the Group’s results in the field of safety at work. Nevertheless, a fatal accident involving a highly experienced contractor in Greece confirmed once again that the field of safety requires constant vigilance and continuous effort to develop a culture of risk prevention. To this end, the Group continued and intensified its safety programs with a view to increasing awareness, providing useful information and educating as many people as possible. Τhe implementation of international and industry standards for the safety of direct and indirect employees remained a key priority in 2013. In addition, particular emphasis was placed on partnership initiatives focused on preventive risk management. These programs were addressed to both students of Polytechnics, through cooperation with the European Network BEST, and to children in primary and secondary education, through the Program «Safety at Home.» Titan is determined to continue and further intensify its efforts towards the achievement of the zero accident target of the Group.

In 2013, the Group also continued the implementation of its five-year action plan aimed at improving overall environmental performance and, in the meantime, initiated a comprehensive review of its strategic targets for 2020. Addressing climate change and utilizing alternative raw materials and energy sources remain key priorities for the Group and consequently a dominant theme in discussions with its stakeholders. In this context, new initiatives were developed by Group subsidiary GAEA, which expanded its activities.

For a second consecutive year, in 2013, Titan served as co-chair of the Cement Sustainability Initiative (CSI), an international partnership for the sustainable development of the cement industry, which has been in place since 2002, under the umbrella of the World Business Council for Sustainable Development (WBCSD). The progress made is reflected in the Initiative’s Agenda for Action, which was broadened to include new actions, ranging from improving management of biodiversity and water to encouraging sustainable construction practices.

The publication of the first comprehensive and integrated Annual Report of the Group in 2012 marked the beginning of a new era, in which the effort to provide more complete and comprehensive information to stakeholders is enriched and expanded, taking into account their needs and expectations. The publication of the first CSR Report in Kosovo in 2013 and the winning of the first prize for the program ILAB (Independent Local Advisory Board), an innovative partnership with the local community, within the European Competition CSR of the EU, reinforce the belief that a commitment to CSR leads to the development of new and innovative approaches and actions that add value not only to the business, but also to local development.

In 2014 the European Commission is expected to issue a new directive for the disclosure of information regarding non-financial performance of companies, in accordance with international standards. Titan already meets the anticipated new requirements for implementation at an “advanced” level, according to the relevant criteria of the UN (Global Compact). The Group has also advanced further to the detailed presentation of relevant information for all countries in which it operates. CSR and sustainable development reports are also issued in local languages with data of interest to local stakeholders in Serbia, FYROM and Kosovo.

RISKS AND UNCERTAINTIES FOR 2014

The Group, by nature of its business and geographical positioning, is exposed to financial risks. The Group’s overall risk management program focuses on financial market fluctuations and aims to minimize the potential unfavorable impact of these fluctuations on its financial performance. The Group does not engage in speculative transactions or transactions which are not related to its commercial, investing or borrowing activities.

FINANCIAL RISKS

Liquidity risk: Liquidity is managed by employing a suitable mix of liquid cash assets and long term committed bank credit facilities. The ratio of unutilized long term committed bank credit facilities and immediately available cash over short-term debt is monitored on a monthly basis. As at 31st December 2013, the ratio of the Group’s committed long-term unutilized facilities and cash over short-term debt stood at 5.92 times.

The Parent Company is registered and the Group undertakes part of its activities in a Eurozone country under an Economic Adjustment and Structural Reforms Program. If the Program fails or is aborted, the Group will face additional liquidity risks. To counter such risks, the Group maintains adequate liquidity reserves so as to be able to address any disturbances inflicted upon its cash flows.

Interest rate risk: 31% of total Group debt is based on fixed, pre-agreed interest rates and an additional 18% of floating interest rate debt has been swapped to a fixed rate basis via floating to fixed interest rate swaps. The impact therefore of interest rate volatility to the Income Statement and Cash Flow is limited, as illustrated by the following sensitivity analysis:

The ratio of fixed to floating rates of the Group’s net borrowings is determined by market conditions, Group strategy and financing requirements. Occasionally, interest rate derivatives may also be used, but solely to minimize the relevant risk and to shift the fixed to floating ratio of the Group’s borrowings, if that is considered necessary. As at 31st December 2013, the Group had €130 million of floating interest rate debt swapped to fixed with an average duration of c. 1 year and at an average interest rate of 2.41%, part of which (€100 million notional) has been designated as cash flow hedge. According to Group policy, interest rate trends and the duration of the Group’s financing needs are monitored on a forward looking basis. Consequently, decisions about the duration and the mix between fixed and floating rate debt are taken on an ad-hoc basis. As a result, all short-term loans have been concluded with floating rates. Medium to long-term loans have been concluded partly with fixed and partly with floating rates.